The guidance below was developed by the Financial Reporting StandardsCommittee (FRSC) of the Hong Kong Institute of Certified Public Accountants(HKICPA) and is for general reference only. The HKICPA, FRSC and the HKICPAstaff do not accept any responsibility or liability, and disclaim all responsibilityand liability in respect of the guidance and any consequences that may arise fromany person acting or refraining from action as a result of any materials in theguidance. Members of the HKICPA and other users of this guidance should alsoread the full HKFRS Accounting Standards, as found in the HKICPA Members’Handbook for further reference, and seek professional advice where necessarywhen applying the references contained in this guidance.The HKICPA's Standard Setting Department welcomes your comments andfeedback on this guidance, which should be sent tocommentletters@hkicpa.org.hk.Determining the applicable HKFRS Accounting Standards forcryptocurrencies and stablecoinsThe Chief Executive’s 2025 Policy Address reaffirms support for the development of fintechin Hong Kong, underscores the new regime for stablecoin issuers (i.e. StablecoinsOrdinance (Cap.656) which came into effect on 1 August 2025) and commits to exploring awider range of digital asset products and services to professional investors.This policy direction highlights the growing importance of digital assets in Hong Kong’sfinancial landscape, making it essential to consider their accounting implications. Currently,no IFRS/HKFRS Accounting Standards1 specifically address digital assets. As such, theprinciples in existing Standards should be applied when determining the appropriateaccounting for such assets.Cryptocurrencies and stablecoins are subsets of digital assets2. This publication highlightsthe distinction between cryptocurrencies and stablecoins, and how to determine whichaccounting standard(s) to apply to them from a holder’s perspective.1)
CryptocurrenciesIn June 2019, the IFRS Interpretation Committee (IFRS IC) issued an agenda decision on‘Holdings of Cryptocurrencies’ (2019 Agenda Decision) which applies to cryptocurrenciesthat meet all of the following characteristics (Scoping Criteria):
(a)
it is a digital or virtual currency recorded on a distributed ledger that uses cryptographyfor security;
(b)
it is not issued by a jurisdictional authority or other party; and(c)
it does not give rise to a contract between the holder and another party.The IFRS IC concluded that a holding of cryptocurrency that meets all of the above ScopingCriteria is not a financial asset under IAS 32 Financial Instruments: Presentation because itis not cash, nor is it an equity instrument of another entity. It does not give rise to a1 HKFRS Accounting Standards are fully converged with IFRS Accounting Standards.2 There is no universally agreed definition of digital assets. The Securities and Futures Commission’s Circular on expansionof products and services of virtual asset trading platforms dated 3 November 2025 defines ‘digital assets’ to include virtualassets, tokenised securities (which is a subset of digital securities), and stablecoins.contractual right for the holder and it is not a contract that will or may be settled in theholder’s own equity instruments.The IFRS IC concluded that IAS 2 Inventories applies to cryptocurrencies when they areheld for sale in the ordinary course of business. If IAS 2 is not applicable, an entity appliesIAS 38 Intangible Assets to holdings of cryptocurrencies that meet all of the above ScopingCriteria.The 2019 Agenda Decision also provided guidance on disclosure requirements.2)
StablecoinsStablecoins are not defined in HKFRS Accounting Standards. There is also no universallyagreed legal or regulatory definition of a stablecoin. The Financial Stability Board defines astablecoin as a ‘crypto-asset that aims to maintain a stable value relative to a specified asset,or a pool or basket of assets’.3 The Stablecoins Ordinance (Cap.656) defines a stablecoinas a cryptographically secured digital representation of value that:
(a) is expressed as a unit of account or store of economic value;
(b) is used or intended to be used as a medium of exchange accepted by the public forpayment for goods or services, discharge of a debt, and/or investment;
(c) can be transferred, stored or traded electronically;
(d) is operated on a distributed ledger or similar information repository; and(e) purports to maintain a stable value with reference to a single asset, or a pool or basketof assets.4There are different types of stablecoins, e.g. algorithmic stablecoins 5, reserve-basedstablecoins6 (such as fiat-backed stablecoins7) and commodity-backed stablecoins, each ofwhich aims to maintain a stable value through different means. This publication focuses onfiat-backed stablecoins held by an entity.Fiat-backed stablecoins would fail the second or the third Scoping Criterion if they have anissuer or if there is a contractual relationship between the holder of the stablecoins andanother party (generally the issuer of the stablecoins or an affiliate of the issuer), andtherefore fall outside the scope of the 2019 Agenda Decision. The appropriate accountingtreatment for fiat-backed stablecoins would depend on the facts and circumstances of eachcase. Entities should thoroughly review the contractual rights and obligations, applicablelaws and regulations, and the specific facts and circumstances of each case; as well as seeklegal and other professional advice to determine the appropriate accounting treatment forsuch stablecoins. Relevant considerations / thought process could include:
•What are the documents accompanying the issue and subscription of the stablecoin?•Which jurisdiction’s laws and regulations are applicable to, and what are the applicablelaws and regulations governing, the issue, subscription and other features (e.g.redemption) of the stablecoin?•What are the specific rights and obligations associated with the stablecoin holder,issuer and other relevant parties, e.g. are there any redemption rights in relation to thestablecoin?3 High-level Recommendations for the Regulation, Supervision and Oversight of Global Stablecoin Arrangements, finalreport, published on 17 July 2023, p19.4 Refer to section 3 of the Stablecoins Ordinance for the exact wording.5 Supra note 3, p17. An algorithmic stablecoin is one that purports to maintain a stable value via protocols that provide for theincrease or decrease of the supply of the stablecoin in response to changes in demand.6 Supra note 3, p18. A reserve-based stablecoin is one that aims to maintain a stable value with a dedicated pool of reserveassets.7 Supra note 3, p18. A fiat-backed stablecoin is one that aims to maintain a stable value with reference to one or several fiatcurrencies and has the potential to be used as a means of payment and/or store of value.•Are the promises or representations in the stablecoin issue documents ‘contractual’within the context of HKAS 32 which refers to ‘an agreement between two or moreparties that has clear economic consequences that the parties have little, if any,discretion to avoid, usually because the agreement is enforceable by law’?8•Are the rights and obligations of the parties involved clearly defined, or are theyambiguous, thereby necessitating legal analysis or opinions before concluding on theappropriate accounting treatment?•What is the entity’s intended use of the stablecoin?•How does the stablecoin derive its value?The decision tree below is intended to assist entities in determining which HKFRSAccounting Standards to apply to fiat-backed stablecoins that meet the definition of an asset.
2.1 Financial AssetParagraph 11 of HKAS 32 defines a financial asset. In summary, a financial asset is anyasset that is:
(a)
cash;
(b)
an equity instrument of another entity;
(c)
a contractual right to receive cash or another financial asset from another entity;
(d)
a contractual right to exchange financial assets or financial liabilities with another entityunder certain conditions; or(e)
a contract that will or may be settled in the entity’s own equity instruments and thatmeets certain conditions.The more relevant parts of the financial asset definition as they apply to stablecoins arediscussed below.8 Paragraph 13 of HKSA 32 states that ‘[in] this Standard, ‘contract’ and ‘contractual’ refer to an agreement between two ormore parties that has clear economic consequences that the parties have little, if any, discretion to avoid, usually becausethe agreement is enforceable by law. Contracts, and thus financial instruments, may take a variety of forms and need not bein writing’.
2.1.1 Cash per HKAS 32 or HKAS 7Paragraph AG3 of HKAS 32 states that ‘currency (cash) is a financial asset because itrepresents the medium of exchange and is therefore the basis on which all transactions aremeasured and recognised in financial statements. A deposit of cash with a bank or similarfinancial institution is a financial asset because it represents the contractual right of thedepositor to obtain cash from the institution or to draw a cheque or similar instrument againstthe balance in favour of a creditor in payment of a financial liability.’ The IFRS IC noted inthe 2019 Agenda Decision that ‘the description of cash in paragraph AG3 of IAS 32 impliesthat cash is expected to be used as a medium of exchange (i.e. used in exchange for goodsor services) and as the monetary unit in pricing goods or services to such an extent that itwould be the basis on which all transactions are measured and recognised in financialstatements.’In practice, certain stablecoins may be used as a medium of exchange for particular goodsor services and may exhibit other typical characteristics of cash to a certain extent, e.g. thestablecoin is being used as a unit of account, store of value or legal tender in a particularjurisdiction.In addition to the description of cash (currency) in paragraph AG3 of HKAS 32, HKAS 7defines cash as comprising cash on hand and demand deposits. As such, an entity shouldconsider if its holdings of stablecoins possess the characteristics of (i) currency (cash) perparagraph AG3 of HKAS 32 or (ii) demand deposits per HKAS 7 to conclude whether thestablecoins could be considered as cash. Judgement and legal opinions on how the matteris viewed in a jurisdiction may be required to arrive at the appropriate conclusion.
2.1.2 Other financial assetA financial asset is defined to include a contractual right to receive cash or another financialasset from another entity. An entity holding a stablecoin that is not cash per HKAS 32 orHKAS 7 (see 2.1.1 above) should evaluate the contractual terms and conditions, legal rightsand obligations, as well as other relevant facts and circumstances to assess whether it hasa contractual redemption right for its stablecoins, and whether that redemption right is a rightto receive cash or another financial asset (as opposed to any other assets) on redemption.This is an area that may require significant judgement as the terms and conditions regardingredemption rights could be complex and/or vague, and entities should consider consultinglegal and/or professional advisors to obtain clarity on its position in this regard. Relevantconsiderations include:
•Are the redemption rights limited by any conditions? What are those conditions? Arethose conditions characteristics of the stablecoins or do they reflect the characteristicsof the stablecoin holders or the stablecoin issuer?•Does the issuer have discretion under specific circumstances to refuse or suspendredemption requests?If the obligation of the issuer to deliver cash or another financial asset is subject tocertain conditions, the stablecoin holder may not have a present, contractual rightto redeem the stablecoin. In such cases, entities must carefully assess the natureof those conditions that limit the holders’ redemption rights when determiningwhether the stablecoin meets the definition of a financial asset. Redemptionrestrictions that reflect characteristics of the stablecoin holder, e.g. clauses thatrestrict the redemption rights of residents of certain jurisdictions, would not affectthe assessment of whether the stablecoin is a financial asset.There may be cases (albeit highly distinctive or atypical) where a stablecoin grants its holdera right to the residual interest in the net assets of the issuer, or a redemption right that shouldbe accounted for separately from the stablecoin. Given the wide range of fact patterns, eachof which has its own specific terms and conditions, entities should consider consulting legaland/or professional advisors to evaluate the contractual rights and obligations associatedwith their holdings of stablecoins to obtain a thorough understanding of the legal positionsof the parties involved, including whether:
•the stablecoin holder has a contractual right to an interest in the net assets of the issuerupon liquidation or bankruptcy of the issuer, such that the stablecoin might be an equityinstrument of the issuer and hence meet the definition of a financial asset for the holder;
•the holder’s interest in the stablecoin represents a security interest in the underlyingassets backing the stablecoin, or a residual interest in the issuer’s net assets;
•there are any indications that the redemption right should be accounted for as aseparate unit of account from the stablecoin.
2.2 Inventory or Intangible assetWhen the stablecoin does not meet the definition of a financial asset, an entity shouldconsider its purpose of holding the stablecoin to apply the appropriate accounting standard.Generally, HKAS 2 would apply if the stablecoins are held for sale in the ordinary course ofbusiness; otherwise, HKAS 38 would apply.
2.3 Further considerationsStablecoin holders should also consider how items are aggregated for presentation in thestatement of financial position and statement of cash flows. Paragraph 54(i) of HKAS 1Presentation of Financial Statements 9 requires an entity to include a line item in itsstatement of financial position that presents the amount of ‘cash and cash equivalents’. Ifthe stablecoin does not meet the definition of cash, an entity would also have to determineif a stablecoin meets the definition of cash equivalents in accordance with paragraph 6 ofHKAS 7 when preparing its statement of cash flows. The pertinent question would bewhether it represents a short-term, highly liquid investment that is readily convertible to aknown amount of cash and which is subject to an insignificant risk of changes in value.Paragraph 7 of HKAS 7 indicates that cash equivalents are held for the purpose of meetingshort-term cash commitments rather than for investment or other purposes and that aninvestment normally qualifies as a cash equivalent only when it has a short maturity of, say,three months or less from the date of acquisition. An entity should assess whether itsholdings of stablecoins meet all of the above criteria, including for example, whether theredemption mechanism allows holders to redeem the stablecoins for cash without an undueperiod of notice and without incurring undue fees or penalties, when determining whetherthe stablecoins could be classified as cash equivalents. Given the diversity of contractualterms and conditions and other relevant facts and circumstances, entities may need toexercise considerable judgment when assessing whether these holdings qualify as cashequivalents.3)
Concluding remarksOnce an entity has determined the appropriate HKFRS Accounting Standards to apply to itsholdings of stablecoins, it should recognise, measure, present and disclose the stablecoins9 Paragraph 103(k) of HKFRS 18 Presentation and Disclosure in Financial Statements for annual reporting periods beginningon or after 1 January 2027.in accordance with the relevant standards. In particular, where stablecoins meet thedefinition of financial assets, they should be recognised and measured in accordance withHKFRS 9 with disclosures provided in accordance with HKFRS 7 and HKAS 7 asappropriate. Entities should also consider whether stablecoins meet the definition of cashequivalents under HKAS 7 when presenting the statement of financial position and thestatement of cash flows. In the light of the wide range of stablecoins and other digital assetsin the market, each with its own unique terms and conditions, it would be impracticable forthe FRSC to provide any definitive views on the appropriate accounting treatment for theseitems.It must be emphasised that entities should take care to conduct a comprehensiveassessment of the contractual and legal rights and obligations associated with these items,obtain a clear understanding of the nature and substance (in addition to legal form) ofrelevant terms, as well as take relevant facts and circumstances into account, whendetermining the appropriate accounting treatment for holdings of stablecoins and otherdigital assets. Entities should also consider obtaining legal and/or other professional adviceto assist them in this regard. This process may require significant judgement and appropriatedisclosures should be made in accordance with paragraph 122 of HKAS 110 to the extentmaterial.This guidance reflects information available as of the date of writing. Stakeholders shouldkeep themselves informed of the developments related to stablecoins and other digitalassets in the market and any further applicable guidance. It should be noted that theInternational Accounting Standards Board (IASB) has identified cryptoassets as a prioritytopic during work on its Intangible Assets project as part of a broader topic of intangibleassets held for investment. Should the IASB publish any standards, amendments orguidance on this topic, the IASB requirements and guidance shall prevail over thispublication.January 202610 Paragraph 27G of HKAS 8 Basis of Preparation of Financial Statements for reporting periods in which an entity appliesHKFRS 18.
Determining the applicable HKFRS Accounting Standards for cryptocurrencies and stablecoins
下载原件The guidance below was developed by the Financial Reporting StandardsCommittee (FRSC) of the Hong Kong Institute of Certified Public Accountants(HKICPA) and is for general reference only. The HKICPA, FRSC and the HKICPAstaff do not accept any responsibility or liability, and disclaim all responsibilityand liability in respect of the guidance and any consequences that may arise fromany person acting or refraining from action as a result of any materials in theguidance. Members of the HKICPA and other users of this guidance should alsoread the full HKFRS Accounting Standards, as found in the HKICPA Members’Handbook for further reference, and seek professional advice where necessarywhen applying the references contained in this guidance.The HKICPA's Standard Setting Department welcomes your comments andfeedback on this guidance, which should be sent tocommentletters@hkicpa.org.hk.Determining the applicable HKFRS Accounting Standards forcryptocurrencies and stablecoinsThe Chief Executive’s 2025 Policy Address reaffirms support for the development of fintechin Hong Kong, underscores the new regime for stablecoin issuers (i.e. StablecoinsOrdinance (Cap.656) which came into effect on 1 August 2025) and commits to exploring awider range of digital asset products and services to professional investors.This policy direction highlights the growing importance of digital assets in Hong Kong’sfinancial landscape, making it essential to consider their accounting implications. Currently,no IFRS/HKFRS Accounting Standards1 specifically address digital assets. As such, theprinciples in existing Standards should be applied when determining the appropriateaccounting for such assets.Cryptocurrencies and stablecoins are subsets of digital assets2. This publication highlightsthe distinction between cryptocurrencies and stablecoins, and how to determine whichaccounting standard(s) to apply to them from a holder’s perspective.1)
CryptocurrenciesIn June 2019, the IFRS Interpretation Committee (IFRS IC) issued an agenda decision on‘Holdings of Cryptocurrencies’ (2019 Agenda Decision) which applies to cryptocurrenciesthat meet all of the following characteristics (Scoping Criteria):
(a)
it is a digital or virtual currency recorded on a distributed ledger that uses cryptographyfor security;
(b)
it is not issued by a jurisdictional authority or other party; and(c)
it does not give rise to a contract between the holder and another party.The IFRS IC concluded that a holding of cryptocurrency that meets all of the above ScopingCriteria is not a financial asset under IAS 32 Financial Instruments: Presentation because itis not cash, nor is it an equity instrument of another entity. It does not give rise to a1 HKFRS Accounting Standards are fully converged with IFRS Accounting Standards.2 There is no universally agreed definition of digital assets. The Securities and Futures Commission’s Circular on expansionof products and services of virtual asset trading platforms dated 3 November 2025 defines ‘digital assets’ to include virtualassets, tokenised securities (which is a subset of digital securities), and stablecoins.contractual right for the holder and it is not a contract that will or may be settled in theholder’s own equity instruments.The IFRS IC concluded that IAS 2 Inventories applies to cryptocurrencies when they areheld for sale in the ordinary course of business. If IAS 2 is not applicable, an entity appliesIAS 38 Intangible Assets to holdings of cryptocurrencies that meet all of the above ScopingCriteria.The 2019 Agenda Decision also provided guidance on disclosure requirements.2)
StablecoinsStablecoins are not defined in HKFRS Accounting Standards. There is also no universallyagreed legal or regulatory definition of a stablecoin. The Financial Stability Board defines astablecoin as a ‘crypto-asset that aims to maintain a stable value relative to a specified asset,or a pool or basket of assets’.3 The Stablecoins Ordinance (Cap.656) defines a stablecoinas a cryptographically secured digital representation of value that:
(a) is expressed as a unit of account or store of economic value;
(b) is used or intended to be used as a medium of exchange accepted by the public forpayment for goods or services, discharge of a debt, and/or investment;
(c) can be transferred, stored or traded electronically;
(d) is operated on a distributed ledger or similar information repository; and(e) purports to maintain a stable value with reference to a single asset, or a pool or basketof assets.4There are different types of stablecoins, e.g. algorithmic stablecoins 5, reserve-basedstablecoins6 (such as fiat-backed stablecoins7) and commodity-backed stablecoins, each ofwhich aims to maintain a stable value through different means. This publication focuses onfiat-backed stablecoins held by an entity.Fiat-backed stablecoins would fail the second or the third Scoping Criterion if they have anissuer or if there is a contractual relationship between the holder of the stablecoins andanother party (generally the issuer of the stablecoins or an affiliate of the issuer), andtherefore fall outside the scope of the 2019 Agenda Decision. The appropriate accountingtreatment for fiat-backed stablecoins would depend on the facts and circumstances of eachcase. Entities should thoroughly review the contractual rights and obligations, applicablelaws and regulations, and the specific facts and circumstances of each case; as well as seeklegal and other professional advice to determine the appropriate accounting treatment forsuch stablecoins. Relevant considerations / thought process could include:
•What are the documents accompanying the issue and subscription of the stablecoin?•Which jurisdiction’s laws and regulations are applicable to, and what are the applicablelaws and regulations governing, the issue, subscription and other features (e.g.redemption) of the stablecoin?•What are the specific rights and obligations associated with the stablecoin holder,issuer and other relevant parties, e.g. are there any redemption rights in relation to thestablecoin?3 High-level Recommendations for the Regulation, Supervision and Oversight of Global Stablecoin Arrangements, finalreport, published on 17 July 2023, p19.4 Refer to section 3 of the Stablecoins Ordinance for the exact wording.5 Supra note 3, p17. An algorithmic stablecoin is one that purports to maintain a stable value via protocols that provide for theincrease or decrease of the supply of the stablecoin in response to changes in demand.6 Supra note 3, p18. A reserve-based stablecoin is one that aims to maintain a stable value with a dedicated pool of reserveassets.7 Supra note 3, p18. A fiat-backed stablecoin is one that aims to maintain a stable value with reference to one or several fiatcurrencies and has the potential to be used as a means of payment and/or store of value.•Are the promises or representations in the stablecoin issue documents ‘contractual’within the context of HKAS 32 which refers to ‘an agreement between two or moreparties that has clear economic consequences that the parties have little, if any,discretion to avoid, usually because the agreement is enforceable by law’?8•Are the rights and obligations of the parties involved clearly defined, or are theyambiguous, thereby necessitating legal analysis or opinions before concluding on theappropriate accounting treatment?•What is the entity’s intended use of the stablecoin?•How does the stablecoin derive its value?The decision tree below is intended to assist entities in determining which HKFRSAccounting Standards to apply to fiat-backed stablecoins that meet the definition of an asset.
2.1 Financial AssetParagraph 11 of HKAS 32 defines a financial asset. In summary, a financial asset is anyasset that is:
(a)
cash;
(b)
an equity instrument of another entity;
(c)
a contractual right to receive cash or another financial asset from another entity;
(d)
a contractual right to exchange financial assets or financial liabilities with another entityunder certain conditions; or(e)
a contract that will or may be settled in the entity’s own equity instruments and thatmeets certain conditions.The more relevant parts of the financial asset definition as they apply to stablecoins arediscussed below.8 Paragraph 13 of HKSA 32 states that ‘[in] this Standard, ‘contract’ and ‘contractual’ refer to an agreement between two ormore parties that has clear economic consequences that the parties have little, if any, discretion to avoid, usually becausethe agreement is enforceable by law. Contracts, and thus financial instruments, may take a variety of forms and need not bein writing’.
2.1.1 Cash per HKAS 32 or HKAS 7Paragraph AG3 of HKAS 32 states that ‘currency (cash) is a financial asset because itrepresents the medium of exchange and is therefore the basis on which all transactions aremeasured and recognised in financial statements. A deposit of cash with a bank or similarfinancial institution is a financial asset because it represents the contractual right of thedepositor to obtain cash from the institution or to draw a cheque or similar instrument againstthe balance in favour of a creditor in payment of a financial liability.’ The IFRS IC noted inthe 2019 Agenda Decision that ‘the description of cash in paragraph AG3 of IAS 32 impliesthat cash is expected to be used as a medium of exchange (i.e. used in exchange for goodsor services) and as the monetary unit in pricing goods or services to such an extent that itwould be the basis on which all transactions are measured and recognised in financialstatements.’In practice, certain stablecoins may be used as a medium of exchange for particular goodsor services and may exhibit other typical characteristics of cash to a certain extent, e.g. thestablecoin is being used as a unit of account, store of value or legal tender in a particularjurisdiction.In addition to the description of cash (currency) in paragraph AG3 of HKAS 32, HKAS 7defines cash as comprising cash on hand and demand deposits. As such, an entity shouldconsider if its holdings of stablecoins possess the characteristics of (i) currency (cash) perparagraph AG3 of HKAS 32 or (ii) demand deposits per HKAS 7 to conclude whether thestablecoins could be considered as cash. Judgement and legal opinions on how the matteris viewed in a jurisdiction may be required to arrive at the appropriate conclusion.
2.1.2 Other financial assetA financial asset is defined to include a contractual right to receive cash or another financialasset from another entity. An entity holding a stablecoin that is not cash per HKAS 32 orHKAS 7 (see 2.1.1 above) should evaluate the contractual terms and conditions, legal rightsand obligations, as well as other relevant facts and circumstances to assess whether it hasa contractual redemption right for its stablecoins, and whether that redemption right is a rightto receive cash or another financial asset (as opposed to any other assets) on redemption.This is an area that may require significant judgement as the terms and conditions regardingredemption rights could be complex and/or vague, and entities should consider consultinglegal and/or professional advisors to obtain clarity on its position in this regard. Relevantconsiderations include:
•Are the redemption rights limited by any conditions? What are those conditions? Arethose conditions characteristics of the stablecoins or do they reflect the characteristicsof the stablecoin holders or the stablecoin issuer?•Does the issuer have discretion under specific circumstances to refuse or suspendredemption requests?If the obligation of the issuer to deliver cash or another financial asset is subject tocertain conditions, the stablecoin holder may not have a present, contractual rightto redeem the stablecoin. In such cases, entities must carefully assess the natureof those conditions that limit the holders’ redemption rights when determiningwhether the stablecoin meets the definition of a financial asset. Redemptionrestrictions that reflect characteristics of the stablecoin holder, e.g. clauses thatrestrict the redemption rights of residents of certain jurisdictions, would not affectthe assessment of whether the stablecoin is a financial asset.There may be cases (albeit highly distinctive or atypical) where a stablecoin grants its holdera right to the residual interest in the net assets of the issuer, or a redemption right that shouldbe accounted for separately from the stablecoin. Given the wide range of fact patterns, eachof which has its own specific terms and conditions, entities should consider consulting legaland/or professional advisors to evaluate the contractual rights and obligations associatedwith their holdings of stablecoins to obtain a thorough understanding of the legal positionsof the parties involved, including whether:
•the stablecoin holder has a contractual right to an interest in the net assets of the issuerupon liquidation or bankruptcy of the issuer, such that the stablecoin might be an equityinstrument of the issuer and hence meet the definition of a financial asset for the holder;
•the holder’s interest in the stablecoin represents a security interest in the underlyingassets backing the stablecoin, or a residual interest in the issuer’s net assets;
•there are any indications that the redemption right should be accounted for as aseparate unit of account from the stablecoin.
2.2 Inventory or Intangible assetWhen the stablecoin does not meet the definition of a financial asset, an entity shouldconsider its purpose of holding the stablecoin to apply the appropriate accounting standard.Generally, HKAS 2 would apply if the stablecoins are held for sale in the ordinary course ofbusiness; otherwise, HKAS 38 would apply.
2.3 Further considerationsStablecoin holders should also consider how items are aggregated for presentation in thestatement of financial position and statement of cash flows. Paragraph 54(i) of HKAS 1Presentation of Financial Statements 9 requires an entity to include a line item in itsstatement of financial position that presents the amount of ‘cash and cash equivalents’. Ifthe stablecoin does not meet the definition of cash, an entity would also have to determineif a stablecoin meets the definition of cash equivalents in accordance with paragraph 6 ofHKAS 7 when preparing its statement of cash flows. The pertinent question would bewhether it represents a short-term, highly liquid investment that is readily convertible to aknown amount of cash and which is subject to an insignificant risk of changes in value.Paragraph 7 of HKAS 7 indicates that cash equivalents are held for the purpose of meetingshort-term cash commitments rather than for investment or other purposes and that aninvestment normally qualifies as a cash equivalent only when it has a short maturity of, say,three months or less from the date of acquisition. An entity should assess whether itsholdings of stablecoins meet all of the above criteria, including for example, whether theredemption mechanism allows holders to redeem the stablecoins for cash without an undueperiod of notice and without incurring undue fees or penalties, when determining whetherthe stablecoins could be classified as cash equivalents. Given the diversity of contractualterms and conditions and other relevant facts and circumstances, entities may need toexercise considerable judgment when assessing whether these holdings qualify as cashequivalents.3)
Concluding remarksOnce an entity has determined the appropriate HKFRS Accounting Standards to apply to itsholdings of stablecoins, it should recognise, measure, present and disclose the stablecoins9 Paragraph 103(k) of HKFRS 18 Presentation and Disclosure in Financial Statements for annual reporting periods beginningon or after 1 January 2027.in accordance with the relevant standards. In particular, where stablecoins meet thedefinition of financial assets, they should be recognised and measured in accordance withHKFRS 9 with disclosures provided in accordance with HKFRS 7 and HKAS 7 asappropriate. Entities should also consider whether stablecoins meet the definition of cashequivalents under HKAS 7 when presenting the statement of financial position and thestatement of cash flows. In the light of the wide range of stablecoins and other digital assetsin the market, each with its own unique terms and conditions, it would be impracticable forthe FRSC to provide any definitive views on the appropriate accounting treatment for theseitems.It must be emphasised that entities should take care to conduct a comprehensiveassessment of the contractual and legal rights and obligations associated with these items,obtain a clear understanding of the nature and substance (in addition to legal form) ofrelevant terms, as well as take relevant facts and circumstances into account, whendetermining the appropriate accounting treatment for holdings of stablecoins and otherdigital assets. Entities should also consider obtaining legal and/or other professional adviceto assist them in this regard. This process may require significant judgement and appropriatedisclosures should be made in accordance with paragraph 122 of HKAS 110 to the extentmaterial.This guidance reflects information available as of the date of writing. Stakeholders shouldkeep themselves informed of the developments related to stablecoins and other digitalassets in the market and any further applicable guidance. It should be noted that theInternational Accounting Standards Board (IASB) has identified cryptoassets as a prioritytopic during work on its Intangible Assets project as part of a broader topic of intangibleassets held for investment. Should the IASB publish any standards, amendments orguidance on this topic, the IASB requirements and guidance shall prevail over thispublication.January 202610 Paragraph 27G of HKAS 8 Basis of Preparation of Financial Statements for reporting periods in which an entity appliesHKFRS 18.